Automotive Axles - 3QSY2012 Result Update - Angel Broking

Automotive Axles (ATXL) reported disappointing 3QSY2012 results primarily due to 12.8% yoy (36.6% qoq) volume decline in the medium and heavy commercial vehicle industry (MHCV) which is the primary revenue driver of the company. Further, margin pressures on account of lower operating leverage benefits also impacted ATXL's operating performance. Going ahead, we expect the growth outlook for the MHCV segment to remain challenging in 4QSY2013E led by slowdown in the industrial activity. We maintain our Neutral rating on the stock.

Poor performance for 3QSY2012: For 3QSY2012, ATXL reported 33.6% yoy (37.9% qoq) decline in net sales to Rs.182cr led by 12.8% yoy (36.6% qoq) decline in MHCV sales. MHCV sales have seen a slump in demand due to general slowdown in the economy led by weakening industrial activity. On the operating front, EBITDA margins declined sharply by 266bp yoy (283bp qoq) to 9.9% following increase in staff expenses and other expenditure. This could probably be on account of lower operating leverage benefit during the quarter. As a result, EBITDA declined by 47.7% yoy (51.7% qoq) to Rs.18cr. Led by weak operating performance net profit witnessed a steep fall of 66.5% yoy (69.9% qoq) to Rs.6cr.

Outlook and valuation: During SY2011-13E, we expect ATXL to report slightly subdued CAGR of ~6% each in its top line and bottom line, respectively. We believe that at current levels of Rs.411, ATXL is fairly valued at 9.6x its SY2013E earnings. Due to limited upside from current levels, we maintain our Neutral rating on the stock.

Source : Equity Bulls

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